This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
IN COURT OF APPEALS
American Business Forms, Inc.,
d/b/a American Solutions for Business,
Rass Trading Corp., et al.,
Filed December 5, 2006
Affirmed in part, reversed in part, and remanded
Pope County District Court
File No. 61-C2-05-303
Joseph A. Nilan, Mark J. Johnson, Gregerson, Rosow, Johnson
& Nilan, Ltd., 1600
Galen E. Watje, Steven C. Moore, Watje & Moore, Ltd.,
Considered and decided by Kalitowski, Presiding Judge; Dietzen, Judge; and Huspeni, Judge.*
Appellants challenge the district court’s default judgment against them and a subsequent order vacating the default judgment on the condition that appellants post a bond, arguing that the district court (1) erred by not requiring respondent to post a bond to obtain a default judgment as required by Minn. R. Civ. P. 55.01(d), and (2) abused its discretion in its second order by requiring appellants to post a bond as a condition of vacating the default judgment. We affirm in part, reverse in part, and remand to the district court to make additional findings regarding the amount of bond required to vacate the default judgment.
Rass Trading Corp. (Rass) and its vice-president, Raj Dhameja, are residents of
ABF and AMBF brought two lawsuits (the ABF lawsuit and the AMBF lawsuit) against Rass and Dhameja, alleging that Rass breached its contracts by failing to timely ship goods that were ordered and paid for and by providing poor quality goods. The same attorney signed both complaints.
In July 2005, appellants
were served with both lawsuits in
In August 2005,
respondent moved for default judgment on both lawsuits. When the
The following day, September 13, the district court considered AMBF and ABF’s motions for default judgment. After being contacted that morning by the court clerk, appellants’ attorney participated in the motion by telephone. Appellants’ attorney asserted that neither he nor his clients had been notified of the default motions or hearing. Respondent then withdrew the AMBF motion for default judgment but requested that default judgment be entered on the ABF lawsuit on the basis that appellants were in default. Following the hearing, the district court granted default judgment on the ABF lawsuit concluding that “[d]efendants have failed to appear, answer, or defend the action in any way.” Judgment was entered against appellants in the amount $379,265.20.
In October 2005, appellants moved to vacate the default judgment. Respondents opposed the motion and argued that they would suffer substantial prejudice if the motion was granted. Respondents relied on the affidavit of ABF Chief Operating Officer Craig McLain, who stated that appellants had become “increasingly slow in responding to orders, failed to meet delivery dates promised, had excessive overruns on some products, and provided poor quality and non-conforming products when delivered,” and that appellants were “increasingly hard to communicate with, and appeared to be avoiding contact.” The affidavit documented 13 separate transactions that McClain alleged cost ABF a loss of $377,491.45. Additionally, ABF argued that it had incurred attorney fees and costs of approximately $50,000.
Following the hearing, the district court granted the motion to vacate on the condition that appellants post bond for $402,000, which was the amount of the default judgment, plus half of the anticipated attorney fees requested by plaintiff. The district court found that the appellants had a colorable defense on the merits, had a reasonable excuse for failing to act, had acted with due diligence after notice of entry of default judgment, and “[t]he award of a bond would alleviate any undue prejudice vacating the default judgment might impose upon the plaintiff.”
Subsequently, appellants requested permission to bring a motion to reconsider, arguing that the district court erred in not requiring respondent to post a bond as a condition to the entry of default judgment pursuant to Minn. R. Civ. P. 55.01(d), and that the amount of bond was unjust as applied to the circumstances of the case. The district court denied appellants’ request on February 1, 2006. This appeal followed.
D E C I S I O N
that the district court erred by not requiring respondent to post a bond as
part of its order of default judgment. Minnesota
Rule of Civil Procedure 55.01 (d), which applies when service of the summons
has been made outside the state, provides that “[N]o judgment shall be entered
on default until the plaintiff shall have filed a bond.”
appellants were served in
a reviewing court must consider “only those issues that the record shows were
presented and considered by the trial court in deciding the matter before it.” Thiele
v. Stich, 425 N.W.2d 580, 582 (
Appellants argue that they raised the issue to the district court in a footnote to their memorandum accompanying their motion to vacate judgment. Respondent argues that it was an obscure reference in a lengthy footnote.
Here, the district court did not consider the argument. Based on our review of the footnote, we conclude that the issue was not adequately raised. See Thiele, 425 N.W.2d at 582 (permitting review of issues if both raised and considered). Appellants also argue that they raised the issue in their request for permission to bring a motion to reconsider. But a motion for reconsideration does not expand or supplement the record on appeal. Sullivan,560 N.W.2d at 716.
But even if we were to consider appellants’ claim, we conclude that it lacks merit. By denying appellants’ motion to reconsider, the district court effectively denied appellants’ argument that a bond should have been required. Thus, we affirm the entry of default judgment.
Appellants argue that the
district court abused its discretion by conditioning vacation of the default
judgment against them upon the posting of a bond for $402,000. A decision to reopen a default judgment is
within the district court’s discretion. Lyon Dev. Corp. v. Ricke’s Inc., 296
Minn. 75, 84, 207 N.W.2d 273, 278 (1973); Imperial
Premium Fin., Inc. v. GK Cab Co., 603 N.W.2d 853, 856-857 (Minn. App.
Here, the district court
found that requiring a bond “would alleviate any undue prejudice.” Whether to require a bond as a condition of
vacating a judgment and the amount of such a bond lie within the discretion of
the district court. Banque Internationale
The district court found that
appellants satisfied the first three prongs of the Finden test and that a bond would “alleviate any undue prejudice
vacating the default judgment might have on the plaintiff.” See,
e.g., Finden, 268
prejudice is inherent in every delay. Sand v. Sch. Serv. Employees, Local 284,
402 N.W.2d 183, 186 (
Where prejudice to the
non-moving party is greater, reopening the judgment may be conditional on
posting a bond. Banque Internationale, 413 N.W.2d at 853. In Banque
Internationale, the court found that a $400,000 bond was not an abuse of
discretion, given the facts of the case.
Here, there was no evidence or finding that appellants secreted assets in an attempt to avoid judgment. However, there are allegations that appellants “have been increasingly late delivering goods, providing poor quality goods when the company did deliver, and increasingly ignored communications from ABF.” Respondent asserts that it has paid $377,491.45 for goods it has not received. Respondent alleges that appellants’ financial situation is deteriorating, and appellants have admitted on appeal that they are unable to post the bond. Such an inability may support an inference that they would have difficulty satisfying the judgment. Cf. Banque Internationale, 413 N.W.2d at 853.
We affirm the district court’s determination that appellants had a reasonable defense on the merits, a reasonable excuse for their failure to act, that appellants acted with due diligence after the entry of judgment, and its decision to conditionally vacate the default judgment. Because the court made no express findings on how respondent would be prejudiced by reopening the judgment or on how the potential prejudice bears on the amount of the conditional bond, we remand to the district court to make findings and determine a bond amount that is consistent with the level of prejudice found.
Affirmed in part, reversed in part, and remanded.
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.
Appellant argues that Brown v. Brown, 37
also argues that the alleged prejudice was shown by “unsworn testimony” of
respondent’s attorney. But, it appears
that the arguments made by respondent’s attorney were based on the affidavit of
respondent’s COO, Craig McLain. Prejudice
(or any of the other four prongs) may be shown by affidavit. Hinz,